Employee Incentives Can Lead to More Harm Than Good
Employee incentives seem like an easy way to get your employees motivated. However, this isn’t always the case. According to a Virginia Tech study, incentives can lead to an increase in unethical workplace behavior.
Many companies are now seeing negative consequences from rolling out incentives like end-of -year bonuses.
“These unintended negative consequences can lead to dishonesty, unethical behavior, increased risk-taking, escalation of commitment, and depletion of self-control,” says co-author of the study, professor Bill Becker.
The study says that setting compensation goals for hitting certain targets can lead to unethical behaviors such as employees falsifying or manipulating reports. To get these results, the study used a simulation that replicates cost reporting decisions. They found that when managers are paid a bonus for hitting certain goals, it leads to an increase in dishonest reporting.
“Goal fixation can have a profound impact on employee behavior, and the damaging effects appear to be growing stronger in today’s competitive business landscape,” says Becker.
One example the study points to is those with occupations like lawyers, contractors, auditors or anyone who gets paid for billed hours. They can report hours against their budget to buff up or trim down their work based on what incentive they want.
“This causes potential for both under-reporting and over-reporting costs, which can undermine organizational objectives and negatively impact the interest of the firm,” says Becker. “Using purely monetary incentives is almost always a double-edged sword.”
Savannah Patton
Savannah Patton is the ICF Communications Assistant and a freelance writer for Kentucky Sports Radio. She graduated in May 2016 from the University of Kentucky with a bachelor's degree in Integrated Strategic Communications with a focus in Public Relations.
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